At Quicken, all borrowers who are approved for a VA streamline refi get the same current interest rate, regardless of their credit score, Banfield says.
pulls a borrower’s credit, but doesn’t use it to underwrite the loan, says Donna Bradford, an assistant vice president with Navy Federal.
Some lenders don’t even ask if you have a job, because the VA doesn’t require income or employment verification.
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You don’t have to live in the home
Many refinancing programs don’t allow homeowners to refi unless they live in the home. That’s not the case with a VA rate-reduction refi.
If you have a VA mortgage on the home, and you lived there at some point, you meet the refi’s residency requirement.
With a streamline refi, the VA also doesn’t require an appraisal of the home.
Still, some lenders may insist on an appraisal and will consider equity and home values when they weigh an IRRRL, says Banfield. So, ask about appraisal requirements when you shop for a lender.
And note that you can be denied if you’re not staying current with the VA mortgage you already have. Some lenders will disqualify you if you’ve been 30 days late with a payment during the past 12 months.
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The refi could save you money
The rate-reduction loan often saves the borrower money, either by cutting the interest rate or shortening the loan term.
In addition, “the VA has a rule that you have to recoup your (refinancing) costs within 36 months,” says Banfield.
Some lenders may “get the veteran excited about lower payments” by spotlighting an adjustable-rate mortgage with an interest rate that can change after three years, says Banfield. But that’s shortsighted.
“Heading into a tightening cycle of interest rates,” Banfield says, “it’s generally a good time to go with a fixed rate.”
Note, however, that refinancing an ARM into a fixed-rate mortgage could potentially result in a higher rate and monthly payment.
The refi comes with a funding fee of 0.5 percent of the loan amount. Some borrowers are exempt. The fee can be paid at closing or rolled into the balance of the loan.
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Just married? Add your spouse to the loan
If you’ve gotten married since you bought the home, the VA’s streamline refi offers an opportunity to add your spouse to your loan.
Likewise, if you’ve gotten divorced, you can take your ex-spouse off the mortgage.
In either event, the eligible veteran or service member must stay on the loan, unless he or she has died. If that’s the case, a surviving spouse can refinance using an IRRRL as long as he or she was also on the original VA mortgage.